Fixed Income
Ukrainian sovereigns ended lower last week despite the milestone ratification by the Ukrainian and EU parliaments of the bilateral political/economic Association Agreement. Investors were largely focused on the worsening macroeconomic conditions in the country, with clear evidence of the real scale of problems coming from news that industrial production in August plunged by 21.4% YoY. In other news, the next round of EU-brokered gas talks between Kyiv and Moscow was rescheduled from Sept 20 to Sept 26. Long-term Ukraine-23s fell by 2.5% to close at 83.8/84.8 (10.4%/10.2%) and medium-term benchmark Ukraine-17s slid 3.1% to 85.4/86.9 (12.5%/11.9%). The quasi-sovereign Eurobonds of natural gas monopoly Naftogaz due to mature next week on Sept 30 were quoted at 99.0 cents per dollar, implying that the market is expecting an on-time redemption.
